The Panama Canal has officially opened to neo-panamax vessels, allowing larger ships direct access to U.S. East Coast ports, which could lead to significant changes in shipping routes and rates. Experts predict that 10-14% of container traffic may shift from West Coast to East Coast ports, potentially driving down freight rates due to increased competition. This shift could have financial implications for carriers, as they may need to lower rates to attract cargo amid a new influx of larger vessels.

1. Panama Canal Finally Opens
& Ocean Freight Rates May
Plummet?

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5. June 26,
2016

6. The 9,472 TEU COSCO shipping panama was the first
Panamax-Plus container vessel to transit the panama canal.
Opening some three years late, at a cost in excess of U.S. $ 5.25
billion, the new locks give container ships (Neo-Panamax)
carrying approximately 13,000 TEU's all-water access from asia
to the important us east coast ports and inland markets.

7. June 30,
2016

8. Only four days later, the MOL benefactor 10,100 TEU's will be
the first 10,000+ TEU vessel to transit the canal; on the G-6
alliance's new Asia- New York-Savannah route.
These two vessels are the advance party of a string of
Post-And-Neo Panamax vessels steaming towards the US East
Coast; there are reports of six 6,000-10,000 TEU vessels
following just days behind the benefactor.

9. Diversion Of Cargo To The
Gulf & East Coast?

10. While this is a boom for
panama, shippers, US /
caribbean consumers,
and businesses, we see
this as a possibly
impeding financial
disaster for the carriers.

11. Let's look at the existing container arrival data from Asia into the
US East Coast – Midwest:
ASIA – US WEST COAST
ASIA – US EAST COAST (PANAMAX-SIZED VESSELS)
ASIA – US EAST COAST VIA SUEZ CANAL:
68%
18%
14%

12. International trade experts such
as CH Robinson and rosemont
college's professor Andrew
Lubin expect that within the
year, some 10-14% of container
traffic from asia into the united
states will be diverted from us
west coast ports to the gulf and
east coast ports.

13. The Neo-Panamaxs will keep the rates low in
order to attract cargo,” Lubin told Xeneta,”and the
direct shipments to the east coast give the
shippers an economically viable option to the
west coast labor unions.
- Rosemont College's Professor Andrew Lubin

14. Possible Drop In Rates To
Attract Cargo

15. One theory is that this could put pressure on rates as more ships can now
compete into the US East Coast, and as the newly arriving fleets of
18-20,000 TEU megas cause more cascading, one of the logical
consequences could perhaps be that carriers would drop their rates in
order to attract cargo.
Earlier this week msc announced they're re-deploying their 13,000 TEU
vessels to their secondary lanes; South America West Coast, West Africa,
and India in order to make room for their 4 newly-arriving 18-20,000 TEU
megas that will complement the Maersk megas they share as part of the
2m alliance.
Two years ago, one of the advantages of the megas was their fuel
efficiency, but today's low bunker prices hurt the carriers more than help
them as the 6,000-8,000 teu ships are kept in service since they can still
operate economically against the megas.

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